IFCI: Industrial Finance Corporation of India Ltd. | Notes

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The Government of India set up the Industrial Finance Corporation of India (IFCI) under IFCI Act in July 1948. Since July 1, 1993, it has been brought under Companies Act, 1956. The IFCI extends financial assistance to the industrial sector through rupee and foreign currency loans, underwriting / direct subscriptions to shares/debentures and guarantees and also offers financial services through its facilities of equipment procurement, equipment finance, buyers’ and suppliers’ credit, equipment leasing and finance to leasing and hire purchase companies. It also provides merchant banking with its Head Office in Delhi and a bureau in Mumbai.

The financial resources of the IFCI are constituted of the following three components:

(i) Share capital,

(ii) Bonds and Debentures; and

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(iii) Other Borrowings.

The IFCI started its lending operations on a modest scale in 1948.

In recent years, the IFCI has started new promotional schemes, such as:

(c) Encouraging the modernisation of tiny, small-scale, ancillary units; and

(d) Control of pollution in the small and medium-scale industries. The IFCI has shown its increasing concern in the development of backward districts.

No doubt, the IFCI has experienced impressive performance over the years. At the same time, it is also true that there are certain flaws in its functioning which have invited criticism from different quarters.

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To quote:

(i) The IFCI’s lending operations have encouraged concentration of wealth and capital. It still pursues a discriminatory policy to the disadvantage of medium and small- scale units,

(ii) there are great delays in sanctioning of loans and, then making the amount of the loan available,

(iii) The IFCI has failed to exercise necessary control over the defaulting and misusing borrowers.